Expect a "gentle decline" in digital signal processor tags
Staff -- Purchasing, 2/17/2005 2:00:00 AM
Most analysts are forecasting little or no growth for the semiconductor industry in 2005. However, some product segments will post double-digit growth. A case-in-point: digital signal processors (DSP).
The DSP market will grow 15% to $9.2 billion in 2005, according to DSP researcher Forward Concepts. That's down from 30% in 2004, but is still a healthy growth rate, says Will Strauss, president of the research firm.
Strauss says DSPs will outperform the overall semiconductor market because of their growing use in cell phones, consumer electronics equipment and equipment that has multimedia functions. "Anything that is multimedia, consumer entertainment or digital communications has to have DSP," says Strauss. The growth in DSP demand is good news for companies such as Texas Instruments, which has a 50% DSP market share. Other major DSP makers include Analog Devices, Qualcom, Agere and Freescale.
Strauss says wireless communications consume about 70% of all DSPs and that won't change anytime soon because cell phone shipments continue to rise. Besides handsets, DSPs are used in wireless communications infrastructure.
"Wireless infrastructure is significant. Most base stations have multiple DSPs," says Strauss. "The cell phone handset market is more significant because 600 million cell phones ship in a year while about 150,000 base stations are installed," says Strauss.
Cell phone demand for DSPs is also growing because multiple DSPs are being used in each handset. In the past, a cell phone would have only one DSP and a RISC (reducing instruction set computing) processor to handling modulation, the display and other basic functions of the phone.
"Now people want video and audio features to go with additional voice communications. That requires additional DSP horsepower," says Strauss. "You don't want it to take that processing power away from the DSP that has been approved for the communications side of it, so you use a separate DSP."
Sometimes the chip is not labeled as DSP. "Sometimes it's called an application processor or graphics accelerator, but they all have DSP engines within them," says Strauss.
Leon Adams, worldwide DSP product marketing manager for Texas Instruments, says that while demand from cell phone manufacturers has been strong, so has demand from "classic telecommunications equipment" such as switches. " There has also been growing DSP demand from voice-over-packet equipment which allows phone use over the Internet. That's occurring as broadband to the home is getting more market penetration," says Adams.
Demand for video via the Internet is another driver of DSP growth in communications equipment.
"If you think about it, the classic payload for packet has been data and voice. But now it's video as well," says Adams. Video requires signal compression and decompression. "That drives demand for higher performance processors which handle voice, data and video," he says.
While DSP demand will be strong, prices should be mostly flat. Manufacturers say unlike several years ago, they are pricing DSPs aggressively as soon as they are introduced.
"We are no longer in the days when you price a DSP at $20, but your selling price is $7," says Bill Gotschenski, product line manager of general purpose processing for Analog Devices Inc. (ADI). "For the most part, we are pricing at the price we are going to sell them. We are far more anxious to have our full factory costs in line such that we can be more aggressive on the front end," he says.
Strauss says price declines last year were modest. "The average price for a DSP for 2003 was $5.76. In 2004 it was $5.36. That is not much of a drop," he says.
He says the reason prices aren't declining is DSP suppliers are continuously adding functionality to DSPs. Many are embedded with coprocessors.
"You get more for your buck. In 2005 we'll see a gentle decline in prices which certainly doesn't make purchasing people happy," he jokes.
Increasing the functionality has been the strategy of ADI over the past two years to broaden the appeal of its Blackfin chips.
"Blackfin architecture lends itself well to a DSP programmer and a microprocessor programmer," says Gotschenski. ADI expects that by broadening Blackfin's appeal, its growth rate will be higher than the overall DSP market.
"We don't want to grow at the DSP rate. If it was 30% last year and less this year, that is unacceptable," he says.
Besides being embedded with coprocessors, buyers can expect DSP parts to consume less power and to increase in speeds. That's because suppliers are moving to 90 nanometer process technology from .13 micron.
"We see 65 nanometer on the horizon," says Strauss. "That will be announced this year or early next year. "Volume shipments of parts made on 65 nanometer process technology will be in later 2006 or early 2007."
As DSP production moves to a smaller geometries, DSP suppliers can make lower power chips at higher speeds.
"It also means you will get more chips per wafer and you will get higher yields," says Strauss.
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